Friday, 5 August 2022

Atlas Air Worldwide Reports Second-Quarter 2022 Results


Reported Net Income of $88.3 Million
Adjusted EBITDA of $215.6 Million
Adjusted Net Income of $97.3 Million



Atlas Air Worldwide Holdings announced second-quarter 2022 net income of $88.3 million, or $2.65 per diluted share, compared with net income of $107.1 million, or $3.53 per diluted share, in the second quarter of 2021.

On an adjusted basis, EBITDA totaled $215.6 million in the second quarter this year compared with $243.7 million in the second quarter of 2021. Adjusted net income in the second quarter of 2022 totaled $97.3 million, or $3.36 per diluted share, compared with $121.8 million, or $4.10 per diluted share, in the second quarter of 2021.

Announced Transaction With Investor Group Led by Funds Managed by Affiliates of Apollo Global Management, Inc., Together With J.F. Lehman & Company, LLC and Hill City Capital LP

In a separate press release, Atlas Air Worldwide today announced that it has entered into a definitive agreement to be acquired by an investor group led by funds managed by affiliates of Apollo Global Management, Inc., together with investment affiliates of J.F. Lehman & Company, LLC and Hill City Capital LP. The transaction consideration of $102.50 per share in cash represents a 57% premium to the 30-day volume-weighted average trading price per share of Atlas Air Worldwide common stock as of July 29, 2022,1 and values Atlas Air Worldwide at an enterprise value of approximately $5.2 billion. Upon completion of the transaction, AAWW will become a privately held company and shares of Atlas Air Worldwide common stock will no longer be listed or publicly traded on the Nasdaq stock market. A copy of that press release is accessible by visiting Atlas Air Worldwide’s Investor site.

In light of the announced transaction with the investor group, Atlas Air Worldwide has cancelled the second quarter 2022 earnings call previously scheduled for Friday, August 5, 2022. The Company is not providing financial guidance for the third quarter and full year 2022.

1 July 29, 2022 represents the last full trading day prior to market speculation regarding a potential sale of the Company.

Second-Quarter Results

“We delivered second-quarter results in line with our expectations,” said Atlas Air Worldwide President and Chief Executive Officer John W. Dietrich. “Through the first half of the year, global airfreight volumes exceeded pre-pandemic levels, while capacity remains constrained, particularly on key long-haul cargo trade lanes.”

Revenue grew to $1.2 billion in the second quarter of 2022 compared with $990.4 million in the prior-year quarter. Volumes in the second quarter of 2022 totaled 83,922 block hours compared with 93,190 in the second quarter of 2021.

For the three months ended June 30, 2022, our reported net income totaled $88.3 million, or $2.65 per diluted share, compared with net income of $107.1 million, or $3.53 per diluted share, in the second quarter of 2021.

On an adjusted basis, EBITDA totaled $215.6 million in the second quarter this year compared with $243.7 million in the second quarter of 2021. Adjusted net income in the second quarter of 2022 totaled $97.3 million, or $3.36 per diluted share, compared with $121.8 million, or $4.10 per diluted share, in the second quarter of 2021.

Reported earnings in the second quarter of 2022 also included an effective income tax rate of 23.2%. On an adjusted basis, our results reflected an effective income tax rate of 22.5%.

Higher Airline Operations revenue primarily reflected an increase in the average rate per block hour, partially offset by a reduction in block hours flown. The higher average rate per block hour was primarily due to higher fuel prices and higher yields (net of fuel), including the impact of new and extended long-term contracts. Block hours decreased primarily due to a reduction in less profitable smaller gauge CMI service flying and our operation of fewer passenger flights, as well as operational disruptions related to an increase in COVID-19 cases late in the second quarter. The increase in cases adversely impacted our crew availability and our ability to position them due to the widespread and well-publicized cancellations of commercial passenger flights.

Airline Operations segment contribution decreased during the quarter primarily due to increased pilot costs related to our new collective bargaining agreement (CBA), higher premium pay for pilots operating in certain areas significantly impacted by COVID-19, as well as higher overtime pay related to an increase in COVID-19 cases late in the second quarter. In addition, segment contribution was negatively impacted by the operational disruptions related to the increase in cases as described in the segment revenue discussion above. These items were partially offset by higher yields (net of fuel), including the impact of new and extended long-term contracts, as well as lower heavy maintenance expense.

In Dry Leasing, segment revenue in the second quarter of 2022 was relatively unchanged compared with the prior-year period. Higher segment contribution was primarily due to lower interest expense related to the scheduled repayment of debt.

Unallocated income and expenses, net, decreased during the quarter primarily due to lower professional fees and lower interest expense related to our adoption of the amended accounting guidance for convertible notes, partially offset by a reduction in refunds of aircraft rent paid in previous years.

Half-Year Results

For the six months ended June 30, 2022, our reported net income totaled $169.8 million, or $5.03 per diluted share, compared with net income of $197.0 million, or $6.59 per diluted share, in the first half of 2021 (which included $40.9 million, $31.9 million after tax, of CARES Act grant income).

On an adjusted basis, EBITDA totaled $418.4 million in the first half of 2022 compared with $425.0 million in the first half of 2021. First-half 2022 adjusted net income totaled $186.0 million, or $6.35 per diluted share, compared with $194.0 million, or $6.55 per diluted share, in the first half of 2021.

Share Repurchases

As previously announced in February 2022, our Board of Directors approved a share repurchase program authorizing the repurchase of up to $200.0 million of our common stock.

In February 2022, we paid $100.0 million and received an initial delivery of 1,061,257 shares of our common stock pursuant to an accelerated share repurchase program (ASR). In April 2022, the ASR was settled and we received an additional 172,887 shares. In total, we repurchased 1,234,144 shares for $100.0 million at an average cost of $81.03 per share under this ASR.

In connection with the announced transaction, we have suspended our share repurchase program.

Fleet

During the second quarter, we took delivery of the first of our four new 747-8Fs. The remaining three aircraft are expected to be delivered throughout the balance of this year. As announced in February 2022, all four of these aircraft are placed with customers under attractive long-term agreements.

In addition, we look forward to the deliveries and placements of the four new 777-200LRFs, for which we are in advanced negotiations. We expect the first aircraft to be delivered late in the fourth quarter of this year and three more throughout 2023.

As previously disclosed, we are purchasing five of our existing 747-400Fs at the end of their leases during the course of this year, the first of which was acquired in March and the second in May. We expect to complete the remaining three aircraft acquisitions between August and December 2022.

Acquiring these widebody freighters underscores our confidence in the demand for international airfreight capacity, particularly in express, e-Commerce and fast-growing global markets, and will drive strong returns for Atlas in the years ahead.

Settlement of 2015 Convertible Notes

On June 1, 2022, the Company’s Convertible Notes issued in 2015 reached maturity.

To settle the Notes, Atlas delivered to holders $216.6 million in cash and 138,509 shares of our common stock. For the value above par, Atlas received 25,957 shares from the bank hedge counterparties, resulting in a net issuance of 112,552 shares.

Cash

At June 30, 2022, our cash, including cash equivalents and restricted cash, totaled $616.9 million compared with $921.0 million at December 31, 2021.

The change in position resulted from cash used for investing and financing activities, including $216.6 million related to the settlement of our 2015 Convertible Notes, $146.3 million for pre-delivery payments for our new aircraft and $100.0 million for our ASR, partially offset by cash provided by operating activities.

Net cash used for investing activities during the first six months of 2022 primarily related to payments for flight equipment and modifications, including aircraft delivery and pre-delivery payments, as well as capital expenditures and spare engines.

Net cash used for financing activities during the period primarily related to payments on debt obligations and the ASR, partially offset by proceeds from debt issuance.







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